Willingness to Pay for Good Quality, Uninterrupted Power Supply in Madhya Pradesh, India

Abstract

"This study undertakes a contingent valuation survey using a stratified random sample of 2083 households in rural Madhya Pradesh, India, with the objective of estimating the benefits of an improved electricity supply to rural households. Willingness to Pay (WTP)estimates using a bidding game and dichotomous choice elicitations formats, show that benefits adequately justify the investments on feeder separation and rural electricity service improvements. Results of this study support similar investments in other states in India with similar electricity services and socio-economic characteristics. The estimated income elasticity of WTP indicates the possibility of progressive tariff increases as household income increases. Simulations using the estimated WTP function show that block and flat tariff exhibit similar impacts on revenue generation; however block tariffs have the ability to induce energy conservation at the household level. Although not entirely conclusive, the study casts doubts about the rationale for subsidies for the poorest households. "